The news on Monday that the state owes taxpayers $1.66 billion in the 2023-24 fiscal year as part of the Taxpayer’s Bill of Rights (TABOR) created one major question: How much will taxpayers get next spring after the state legislature uses the surplus funds for other designated tax credits?

Refunds are paid from general fund dollars, individual and corporate income, and sales taxes.

Next year, $1.66 billion will be refunded through three mechanisms.

• About $166 million will be paid for the homestead property tax exemptions. Those exemptions go to seniors aged 65 and older who have lived in their homes for at least 10 years, disabled veterans, their surviving spouses, and Gold Star spouses. The refund exempts 50% of the first $200,000 of the primary residence’s actual value.

• The second refund is a state income tax rate reduction from 4.4% to 4.25% in 2025. That refund is applied to tax returns. That is a total of $468 million.

• The third is a reduction in the state sales tax, also paid out through income tax filings and pegged at $1.026 billion for the 2024 tax year. That reduction is in six tiers and based on adjusted gross income.

How much will you get?

If you are not a senior or veteran, you will receive the income tax rate reduction and the sales tax refund, which will be applied to your 2024 taxes, when you will file next April.

The six-tiered refund looks like this:

First, do not get too excited about refunds. Democrats in the state legislature tapped TABOR surplus dollars to pay for various tax credits, including for care workers, a “family affordability tax credit,” higher education expenses, and the expansion of the earned income tax credit for low-income Coloradans. Those tax credits will come out of the surplus first, beginning in 2026, and that means a much lower or even non-existent TABOR refund in the future.

The family affordability tax credit will take $684 million from the TABOR surplus in the 2024-25 fiscal year. The earned income tax credit will take $136 million, a senior housing credit will take $34 million, the care workers credit will take $21.2 million, and the higher education expenses credit will take $18.1 million. That is almost $900 million, and it all has to be paid by general fund dollars in a state budget that already worries budget writers.

The estimate for 2026 is a flat $41 per taxpayer or $82 for joint filers for the six-tiered sales tax refund. It increases to $73 single/$146 joint in the following year.

The income tax rate reduction will vary depending on the amount of the TABOR surplus, according to the September 2024 revenue forecast from the Legislative Council. The forecast estimated it would be 4.28% in 2026 (and payable in 2027), based on what’s left of the surplus after the property tax refunds are paid out.

That same forecast, however, said economists do not expect that refund mechanism to be triggered in the 2025 tax year (and payable in 2026).

A bill in the 2024 session also added a fourth refund mechanism on sales and use taxes, but it will not be triggered until the 2025-26 fiscal year.

The Department of Revenue is expected to release estimates at the end of the month on the refunds available from the income tax rate reduction that will be paid out next year.